* TSX down 411.68 points, or 3.3 pct, at 12,167.93
* All 10 main index sectors drop sharply (Updates to late afternoon)
By Claire Sibonney
TORONTO, Aug 18 (Reuters) - Toronto's main stock index tumbled more than 3 percent on Thursday as mounting worries about a new recession and the likelihood that the European debt crisis might spread to the U.S. banking sector rattled investors.
All 10 of the TSX's main sectors were down sharply, though some gold miners rallied on record bullion prices and financials lost less than their U.S. counterparts, helping the index outperform markets south of the border. [GOL/]
U.S. indexes were down 4 percent to 5 percent or more, while U.S. oil futures plunged $5 a barrel and other commodity prices also sold off. [O/R] [.N]
At 3:20 p.m. (1920 GMT), the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was down 411.68 points, or 3.3 percent, at 12,167.93, touching its weakest level since Aug. 11.
Among the heaviest decliners, Suncor Energy (SU.TO) plunged 6.2 percent to C$29.78, Potash Corp (POT.TO) knocked off 5.6 percent to C$51.15, and Canadian Natural Resources (CNQ.TO) lost 6.6 percent to C$33.76.
"When people woke up this morning, the glass wasn't half full, it was empty," said Paul Hand, managing director at RBC Capital Markets.
Hand said he would describe the collective mood of investors as "manic" given the malaise about the global economy and Europe's spreading debt crisis.
While a Federal Reserve official said the Fed scrutinizes U.S. banks and the American units of European banks equally, a Wall Street Journal report said regulators are questioning the U.S. units of Europe's lenders more closely. [ID:nL5E7JI0Q]
Gavin Graham, president of Graham Investment Strategy, said that investors are fearful of the banking system freezing up like it did in 2008.
"Until the European authorities, (French President) Sarkozy and (German Chancellor) Merkel, get together and say we will unconditionally guarantee all deposits at banks in the European system, then you're not going to get a resolution of this," said
"And they can do that, effectively that's what the Fed did in 2008 ... and that was what finally stemmed the tide."
Morgan Stanley said the United States and euro zone were "dangerously close to recession", while a slew of disappointing U.S. data, including factory activity, home resales, jobless claims and inflation, added to the gloomy mood. [ID:nL3E7JI1LM] [ID:nN1E77H0E8]
Among the top gainers on the index, New Gold (NGD.TO) rose 2.8 percent to C$12.30, Agnico Eagle (AEM.TO) added 0.6 percent to C$62.99, and software company Open Text OTC.TO rallied 5.2 percent to C$53.57.